A middle-class family whose employer provides no health benefits would not get a subsidy, nor would family members be able to buy coverage through the state purchasing pool — even if their employer paid into it in lieu of providing health benefits. Such workers, who would be mandated to carry insurance, would pay about $12,000 a year for comprehensive family coverage. Individual policies would cost about $4,500.

That means that a typical family of four earning about $60,000 a year would spend about 20% of its income on premiums — not counting deductibles, co-pays and non-covered medical expenses. A catastrophic plan would cost less — perhaps $3,000 to $4,000 a year — but that family would still face a $5,000 deductible and an out-of-pocket limit of $10,000 a year. One hospitalization could easily hit that limit, again causing the family to spend about a fifth of its income on medical care.

But that second paragraph misses the point; if a middle-class family with no insurance at all has an incident requiring hospitalization, the out-of-pocket costs likely will exceed the $14,000 bill for medical coverage ($4,000 for catastrophic coverage plus $10,000 out-of-pocket maximum). So which is better: potentially unlimited losses in the event of a catastrophe, or defined, limited losses with known costs? One major problem with healthcare in this country: everyone carries risk, but too few people plan for it.

8
comments:

I think the point is that while defined, known costs and losses are clearly better than unknown unlimited losses, those defined/limited costs are still rather high...some would argue, too high. 20% of your income is what you expect to pay for your house, not your health insurance...

Agreed, but you'd only pay 20% if the catastrophic event occurred. If it didn't, you'd be paying $4,000 to cover your family -- 6.7% of a $60,000 income -- and it would be tax-deductible via a Health Savings Account.

Further: if the catastrophic event did occur, and you had health insurance, you'd be capped at paying 20% of your income (the cap would be $10,000 out-of-pocket, plus the premium of $4,000 = $14,000, 23% of a $60,000 income). That's far less than a hospital stay would cost you otherwise (upwards of $20,000 before you get the doctor's bill).What's more, amounts you spend on medical expenses totaling at least 7.5% of income ($4,500 in our example) are tax-deductible.

6.7% - that's only true if you only buy catastrophic coverage and nothing catastrophic happens. So you're paying 6.7% to cap potential losses at 20%, without actually gaining any real health care. So yes, they could just get a catastrophic plan, but...regularly health care is important, and expensive, and a family needs a comprehensive plan.

The article says the family would pay 20% ($12,000) JUST for the premiums for a comprehensive plan - that's before anything happens, before anything catastrophic, or even before going to the doctor once.

And yes, they could deduct it, but by my (admittedly very rough) calculations, that still leaves the cost at about 18% of their total gross income.

This whole conversation is making me very grateful that Oh Bee Juan and I pay less than 1% for our premiums...

Yes, you need regular medical checkups. I'm not convinced you absolutely need insurance to cover that, however; it's not really what insurance was designed for. These days, we expect health care "insurance" to cover expected events as well as unexpected ones. But in the same way that no one expects life insurers to cover suicide or already-diagnosed terminal illnesses (effectively planned deaths), no one should expect health insurance to cover regular doctor's visits (planned outlays). And if we're to provide a social safety net for those without the money to provide it for themselves, then we should concentrate first on the biggest potential outlays: unexpected catastrophic events (car crashes, sudden illness, and the like). Once we have a system in place that shares those risks across a wider populace, we can come up with ways to get people to see a doctor on a regular basis -- but first things first.

No, not just regular checkups - but regular healthcare so that when you get sick, you can go to the doctor to get the tests/scans/antibiotics/whatever that you need. So that you can get the prescriptions you need if you have diabetes, or heart problems, or high blood pressure.

Here's what I know: without comprehensive insurance, I wouldn't pay to go to the doctor to make sure that my three-week cold isn't strep throat, the lump in my leg would've cost thousands of dollars, and my regular migraine meds would cost me about $4500/year.

And particularly with children (per the $12,000/year family coverage example), you need to have comprehensive insurance for the many illnesses, vaccinations, checkups, pre-school-enrollment exams, and my-kid-has-a-fever-and-I'm-scared-and-want-a-doc-to-see-him events.

Also, if you shift the emphasis to catastrophic coverage while neglecting comprehensive, you're risking increasing the number of catastrophic claims - when people don't go to the doc when sick or can't afford to manage their chronic conditions and end up in the hospital.

While it'd be great if we could just concentrate on making sure that everyone has the basic catastrophic coverage first, I don't think that we really have that option.

I think the problem lies in the bed that legislation and the insurance industry have become so comfortable rolling around in. As long as there is legislation that mandates insurance for any reason, insurance costs will continue to rise whether it is for expected or catastrophic medical events. I agree that 20% on one's yearly income is too much to pay for a medical event. We do, however, have to factor in the rising cost of health care. State of the art care requires state of the art equipment which requires state of the art minds which requires state of the art educations that carry state of the art price tags.

An over simplified answer to this problem will be to socialize medicine - Americans...er...Capitalists...will not accept such a plan. Mostly because Americans hate change unless it will make the top 1% richer. I say Americans and the top 1% in the same sentence because the Trickle Down Theory is a very poor political strategy that still clings to and runs the American economy.

As it happens, those who run the insurance industry are in the top 1% and contribute countless dollars to election campaigns. Socialized medicine will kill the insurance industry and completely revamp Congress and many other congresses, which will send the county into a vicious tailspin.

So to answer the question, neither is particularly a great idea, but in the spirit of fostering predictability and retarding increasingly steep rise in litigation defined, known costs and losses in the better choice.